Page 115 - Liability Insurance IC74

Guide for Liability Insurance

incorporation into the structure, machinery or control
of any aircraft. For e.g, the insured may be supplying
products like aircraft engine or tyres for aircraft. A
defective part may result in damage to the aircraft
or even a crash. Such catastrophic risk is covered
by specialist aviation insurance market. The
products liability policy does not cover liability for
such claims.

(iv) Liability arising out of any product guarantee.
Manufacturers often guarantee their product for a
specified period and replace or repair defective parts
during the guarantee period. The costs of repair,
replacement etc are actually business risks and
cannot be covered under an insurance policy, as
they would require underwriting a manufacturer's
technical skills and know-how.

(v) Liability arising out of claims for failure of the goods
or products to fulfil the purpose for which they were
intended. This exclusion is referred to as 'efficacy
risk'. For e.g, a burglary alarm may fail to function
at the time when burglar breaks into premises,
pesticides may fail to kill the pests, machineries
supplied to a factory may start malfunctioning
resulting in loss of production etc. These examples
show that these are commercial or trade risks and

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